The Ghana Securities Industry Association (GSIA), a body of fund management firms, has appealed to government to pay individual and institutional customers of defunct savings and loans, finance houses and microfinance companies more in cash than the bond option that the Receiver announced in April, 2020.
The Receiver, Eric Nana Nipah, in April, 2020, in a notice stated that Consolidated Bank Ghana (CBG) will be issuing a government backed non-interest bearing financial instrument worth approximately GH¢4billion to depositors of savings and loans, microfinance companies and finance houses.
The characteristics of the instrument were outlined and included zero-rated coupon, with five-year tenor and can only be drawn down in 10 equal instalments every six months and the only time a first withdrawal can be made is March 31, 2021.
The GSIA, in a press release, noted that with some GH¢1.87 billion of investment banks’ or fund managers’ funds locked up with these defunct savings and loans, and microfinance companies, the move to pay only GH¢83 million, representing less than 6 percent, in cash from the total GH¢1.87 billion locked up is unfair.
To date, more than GH¢1.43 billion of the GH¢1.87 billion exposure has been validated. Meanwhile, the GSIA opined, some institutions in other sectors of the financial system have received more than 50% cash payments. “Should the instrument be traded in its current form; investors stand to lose a substantial portion of their investment value.”
The association noted that it has had a number of engagements with key stakeholders, namely including the Securities & Exchange Commission (SEC); Ministry of Finance (MoF); Consolidated Bank Ghana (CBG); and the Receiver but to no avail.
“These engagements with stakeholders are still ongoing. Our goal is for our numerous clients to be given a higher cash portion. An increase in the cash component of the pay-out will ease the already tight liquidity situation in the sector and provide relief to these clients.
“We acknowledge the tight fiscal situation of the government. However, on behalf of our members and these clients, we are appealing to the government through the Ministry of Finance to urgently consider our request,” the statement read. It further appealed for a speedy resolution of the issue to restore calm and bring relief to the sector.
On August 16, 2019, the Bank of Ghana revoked the licences of 23 savings and loans institutions and in May, 2019, some 347 microfinance institutions licences were also revoked as part of its banking sector clean-up exercise.
This exercise was carried out with the assurance that no depositor or investor would lose their funds. There has been an ordered process since, with the appointed Receiver for the process of paying depositors and investors all or part of their monies after their balances have been reconciled.